Five years ago, a hedge fund started with $200 million of assets under management and generated an average annual return of 30% for each of the first two years. With this outstanding performance, the hedge fund attracted $500 million in new assets at the start of year 3 and $300 million at the start of year 4 and earned 0% in years 4 and 5.

Required

1. What was the hedge funds time-weighted average annual return over the five-year period?

2. What average annual return did the average investor in the hedge fund actually earn over the five-year period? What is this return called?